Paytm Launches its own credit scoring

BENGALURU: Paytm is launching a credit scoring product, Paytm Score, on its platform, based on customer transactions and behaviour.
This is part of the online payments firm’s entry into the credit segment, after it recently took a stake in online lending startup CreditMate and also launched a virtual credit card with ICICI Bank, people aware of the matter said.

In China as well, players such as Alipay and WeChat Pay have introduced similar scores, which have triggered a controversy about privacy and consent, as per recent news reports.

Paytm Score will factor in the customer transactions across the company’s multiple offerings, including wallet, e-commerce, bookings platforms, and will throw up a final score that it is likely to be shared with the company’s lending partners, said one of the persons, who did not wish to be identified.

The company has already started approaching some digital lenders and non-banking financial companies with the product, the person said.

Paytm did not respond to ET’s queries regarding Paytm Score.

Fintech experts said this is a natural progression for companies such as Paytm to leverage data of their large customer base.

“Data is the new oil, but credit is the driver of scale in commerce. By leveraging its customer data to provide a credit scoring service, Paytm is taking a big step in becoming a credit marketplace – and it should make the service more attractive to users and partners,” said Sanjay Swamy, managing partner at Prime Venture Partners.

“In a country like India which was data poor, digital transactions of all kinds will be a key enabler, and this is what companies can eventually monetise,” he said.

Financial services and products will be the core source of revenue for Paytm’s payments bank, which was launched last year, since the entity cannot lend directly. The company had set up a separate entity called Paytm Financial Services last year to offer financial products.

In November last year, Paytm partnered with ICICI Bank and launched ‘Paytm-ICICI Bank Postpaid’, to offer short-term instant digital credit to customers.

In the same month, Paytm also picked up a majority stake in CreditMate, a Mumbai-based startup that facilitates two-wheeler loans for customers.

Paytm backer Alibaba’s Ant Financial arm launched a credit score called Sesame Credit in 2015, while Tencent recently launched a similar score for users of its WeChat app. However, the products have raked up controversy in China, with reports suggesting concerns about customers being made to use these products by default and sharing of data with the government.

Last month, Ant Financial apologised for putting a default opt-in to its social credit scoring service when users accessed its annual user footprint report in the app. Tencent was also reportedly forced to pull down its credit product after facing criticism.

In India, credit scoring based on financial transactions is expected to be a big boost to flow-based lending, especially for those without a formal credit history.